Microsoft’s £8bn bet on the artificial intelligence arms race 

It has been described as the greatest technological breakthrough since the printing press, electricity and even fire.

So it might come as no surprise that Microsoft has pumped a whopping £8 billion into a new partnership with artificial intelligence leader Open AI and its much-hyped Chat GPT model.

It’s all part of an expensive and lengthy quest to brave a new world where content and productivity are king.

In the simplest terms, artificial intelligence (AI) is computer programming that allows machines to behave like humans.

Examples include everything from the spam filter in your inbox, which is trained to recognize “junk,” to Amazon Alexas scattered around your home that respond to your voice.

First developed in the 1950s, AI means computers can be trained to mimic conversations, make predictions or recommendations, and ultimately process data much faster and more efficiently than humans can.

So why, if AI has been around for so long, are we seeing such an acceleration in 2023?

The main reason, according to Dr Mhairi Aitken, research fellow at science hub The Alan Turing Institute, is because of advances in “generative AI”, which not only makes processes faster, but can also be used to create completely original and new content , including audio, images, texts and videos.

Chat GPT, which is owned by Elon Musk-backed Open AI, is the most famous of these computer models, which exploded in popularity after it was made free to the public in November, with more than 1 million users in five days.

Whether former US Treasury Secretary Larry Summers is correct in describing the model as “on par with the printing presses, electricity, and even the wheel and fire,” the output is certainly impressive.

Last weekend, Chat GPT was able to produce an essay that passed the final MBA exam for business leadership at a leading American university, which has been used to draft legal contracts, create artwork and produce original lyrics in each artist’s style in the world.

Tech analyst Matt Navarra said Microsoft’s investment in Open AI was a “smart move,” reflecting the company’s desperate attempt to modernize and flex its muscles at Google, which has been working on its own generative AI for some time. “The fact that Microsoft pulled this off is a huge success story for them,” he said.

Wedbush analyst Dan Ives called it an “AI arms race,” with every tech company looking to take the lead in this highly lucrative sector.

“All major companies are going to be making big bets on AI with a payout starting in 2023 and beyond. It is the fourth industrial revolution. Despite the dark macro backdrop, the tech stalwarts remain in growth mode,” he explained.

Estimates from Air Street Capital’s 2022 State of AI report suggest global investment in AI scale-up and start-ups reached nearly £40 billion last year, with almost all of Silicon Valley wading into the mix.

The stakes are high. PwC estimates that AI could contribute up to £13 trillion to the global economy by 2030, more than the current output of China and India combined.

Shortly after Microsoft announced the Open AI deal, Google issued an internal “code red,” pushing plans to showcase an AI version of its search engine over fears that Microsoft could integrate Chat GPT into its own, less used search engine Bing.

The flip side of all these developments is the question mark surrounding jobs. This felt particularly relevant as the companies that invest are also laying off staff.

Data tracker Layoffs.fyi estimates that as many as 57,000 people in the tech sector will be laid off in 2023 alone.

Still, the consensus is that this is bad timing rather than a fraught big tech strategy.

Michael Gartenberg, a technical analyst at Flash Advisory & Research, dismissed the correlation between AI investments and layoffs. He said that while it was “bad optics” for a company like Microsoft, tech giants are slowly moving to AI.

After all, Microsoft invested over £800 million in Open AI in 2019, long before AI novices used it to write Linkedin marketing messages.

Aitken also downplayed broader fears surrounding job safety. “AI is going to automate a lot of the tasks in the workplace, but it won’t get rid of jobs completely,” she said. sector, from fashion to drug development.

An HSBC report, “Will AI take your job?”, written by economist James Pomeroy, makes a similar point.

“AI is more likely to take over part (the boring part) of your work, rather than all of it,” he explains. This could deliver significant productivity gains for many roles if used correctly, and while the outlook for AI and its impact is uncertain, this is just the beginning.”

So while an AI war breaks out between Google and Microsoft, the reality is that AI is here to stay – reinventing what our jobs look like, what Silicon Valley looks like, and maybe even what the world of business, art and music looks like sees.